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[2022] ZAMPMBHC 39
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City of Mbombela v SMEC South Africa (PTY) Ltd (2438 / 2021) [2022] ZAMPMBHC 39 (30 May 2022)
THE
HIGH COURT OF SOUTH AFRICA
MPUMALANGA
DIVISION, MBOMBELA MAIN SEAT
CASE
NO: 2438 / 2021
REPORTABLE:
YES
OF
INTEREST TO OTHER JUDGES: NO
REVISED.
30
MAY 2022
In
the matter between:
CITY
OF MBOMBELA
APPLICANT
and
SMEC
SOUTH AFRICA (PTY) LTD
RESPONDENT
Delivered:
This judgment was handed down
electronically by circulation to the parties' representatives by
email. The date and time for hand-down
is deemed to be 10H00 on 30
May 2022.
J
U D G M E N T
RATSHIBVUMO
J:
[1]
Following the services rendered for the Applicant
by the Respondent, the bill was sent for the payment of
R3 103 565.93.
These services were rendered in terms of the
contract entered into between the two on 23 March 2017. The
Applicant’s failure
to pay prompted the Respondent to issue
summons over this payment. The Applicant did not file a notice of
intention to defend the
action. A default judgment was granted by
this court on 08 October 2021. The Respondent’s attorneys
delivered a letter notifying
the Applicant of the default judgment on
22 October 2021. On 18 March 2022 the Applicant launched this
application with a view
to have the default judgment rescinded. The
Respondent is opposed to the application.
[2]
The
application is brought in terms of Rule 31(5)(d) alternatively, under
the common law.
[1]
Rule 31(5)
provides as follows,
“
(5)
(a)
Whenever
a defendant is in default of delivery of notice of intention to
defend or of a plea, the plaintiff, who wishes to obtain
judgment by
default, shall where each of the claims is for a debt or liquidated
demand, file with the registrar a written application
for judgment
against such defendant: Provided that when a defendant is in default
of delivery of a plea, the plaintiff shall give
such defendant not
less than five days’ notice of the intention to apply for
default judgment.
(b)
The
registrar may —
(i)
grant judgment as requested;
(ii)
grant judgment for part of the claim only or on amended terms;
(iii)
refuse judgment wholly or in part;
(iv)
postpone the application for judgment on such terms as may be
considered just;
(v)
request or receive oral or written submissions;
(vi)
require that the matter be set down for hearing in open court.
Provided
that if the application is for an order declaring residential
property specially executable, the registrar must refer such
application to the court.
(c)
The
registrar shall record any judgment granted or direction given.
(d)
Any
party dissatisfied with a judgment granted or direction given by the
registrar may, within 20 days after such party has acquired
knowledge
of such judgment or direction, set the matter down for
reconsideration by the court.
(e)
The
registrar shall grant judgment for costs:
(i)
in accordance with Part II of Table A of Annexure 2 to the Rules for
the Magistrates’ Courts plus the sheriff’s
fees if the
value of the claim as stated in the summons, apart from any consent
to jurisdiction, is within the jurisdiction of
the magistrate’s
court; and
(ii)
in other cases, unless the application for default judgment requires
costs to be taxed or the registrar requires a decision
on costs from
the Court, in accordance with items 1 and 2 of Section B of rule 70
plus the sheriff’s fees.”
[3]
It appears plainly clear that this sub-rule is
designed to guide the Registrars and legal practitioners in respect
of matters decided
by the Registrars including the rescission of
judgments. Interestingly, the Applicant attached to this application,
a copy of the
order that reflects that it was Mashile J who granted a
default judgment in favour of the Respondent. An application premised
on
Rule 31(5)(d) is therefore misplaced and so is the condonation
application flowing therefrom. A condonation for the late filing
of
the rescission application under this sub-rule stands to be dismissed
for reasons that there is no judgment entered by the Registrar
before
the court.
[4]
The
rescission application can still be considered under common law. The
Respondent argued that the applications should have been
brought
under Rule 31(2)(b) and could not as such be brought under common
law. Its argument to that effect is grounded on
Chetty
v Law Society, Transvaal
[2]
which held that where the rescission application is not covered under
Rule 31 or Rule 42, the only basis for that application would
therefore be under the common law. This argument is misleading as it
misinterprets
Chetty
.
While it is true that where the application for rescission is not
covered in the Uniform Rules, it can only be brought under common
law; it does not preclude the court from hearing applications under
common law for reason that it can be brought under the Uniform
Rules.
[3]
The court’s
jurisdiction to grant a rescission of judgment can therefore be
provided by the rules and/or under common law.
[5]
Under
the common law, a court is empowered to rescind a judgment obtained
on default of by the respondent on sufficient or good
cause shown.
[4]
There are no rigid limits set for the circumstances which
constituted good cause. Broadly speaking, the exercise of the court's
discretion was influenced by considerations of fairness and justice,
having regard to all the facts and circumstances of the particular
case. In each case, the
onus
of
showing the existence of good cause rests on the applicant. The
applicant has to satisfy the court that there was some
reasonably satisfactory explanation why the judgment was granted by
default. Generally, in order to show sufficient cause, it is
incumbent upon the applicant to show that: (1) he/she has a
reasonable explanation for his/her default. If it appears that his
default was wilful or due to gross negligence, the court should not
come to his/her assistance; (2) he/she is
bona
fide
and
the application is not made with the intention of merely delaying the
claim; (3) he/she has a
bona
fide
defence
to the claim. It is sufficient if he makes out a
prima
facie
defence
in the sense of setting out averments which, if established at the
trial, would entitle him/her to the relief asked for.
He/she need not
deal fully with the merits of the case and need not produce evidence
that the probabilities are in his favour.
[5]
[6]
In an attempt to deal with the wilful default
requirement, the General Manager, Legal Services, who deposed to the
founding affidavit
gave a detailed account explaining the “custom”
that is undertaken once documents meant to initiate legal proceedings
are received by anyone working for the municipality. All such
documents have to be forwarded to the office of the Municipal Manager
who would then channel them to the office of the General Manager,
Legal Services. Once on his desk, the General Manager, Legal
Services
would decide on the appropriate steps to be taken, including a
decision on whether to defend the action.
[7]
This custom was not observed in this instance as
the municipal employee upon whom the summons was served did not take
it to the
office of the Municipal Manager and it was not channelled
to him. When asked, the municipal employee indicated that he had no
recollection
of the matter or what he did with the summons. In a
non-committal and true comic fashion, Mr. Mbatsane, a Records Clerk
for the
Applicant went on to depose a confirmatory affidavit in which
he attests that everything in it falls within his personal knowledge.
What he meant by personal knowledge was that which the General
Manager, Legal Services said about him, to wit, that he has no
recollection about the matter or what he did with the summons.
[8]
In dealing with this aspect, it appears as though
the Applicant forgot that the onus is on it to show that the default
was not wilful
on its part. The affidavit reads like it wanted this
responsibility out of the way as quickly as possible, paying very
little attention
to the detail. While the deponent to the affidavit
refers to the custom on what happens when the Applicant’s
employees receive
legal documents, he is silent on how this custom
was communicated to them.
[9]
Few questions remain unanswered: Is Mr. Mbatsane
aware of this custom? The return of service avers that he was
informed of the “nature
and exigency” of the document
handed over to him by the Sheriff. Was he indeed informed of this?
Where is the summons now?
The reason the Sheriff had to explain the
nature and exigency of the summons is that it is not just a piece of
paper he was served,
but a court process document and in this case,
involving millions of rand being claimed. Are there disciplinary or
corrective measures
taken against him for not adhering to the custom
and not dealing with court documents the way he should have? The
founding affidavit
is quiet on this. The Applicant is a juristic
person. The service of court processes is complete when served on its
employees like
it was done here. To come to court and allege lack of
recollection is not enough and is not convincing.
[10]
As for the
bona fide
defence which
prima
facie
carries some prospect of success,
the Applicant avers that the contract which forms the basis of the
claim, is unlawful. It submitted
that procurement of services and
goods by a State organ such as the Applicant must comply with section
217 of the Constitution.
That section provides that when an organ of
State in the national, provincial or local sphere of government, or
any other institution
identified in national legislation, contracts
for goods or services, it must do so in accordance with a system
which is fair, equitable,
transparent, competitive and
cost-effective.
It was further submitted
that sections 111 to 119 of the Municipal Finances and Management
Act, No. 56 of 2003 read with regulation
3 and the municipal supply
chain management policy of the Applicant give effect to section 217
of the Constitution. The supply
chain management policy requires that
goods and services the value of which exceeds R200 000.00 and
long term contracts (exceeding
a year) may be procured by the
municipality only through a competitive bidding.
[11]
It was submitted by the Applicant therefore that
as the contractual value between it and the Respondent was above
R200 000.00,
there should have been a bidding process which in
this case did not happen rendering the agreement unconstitutional and
invalid
and therefore unenforceable. Subject to the granting of the
rescission, the Applicant intends to raise unlawfulness of the
agreement
as a defence in its plea. It also intends to bring a
self-review application based on the principle of legality.
[12]
In opposing this application, the Respondent
raised two main issues. The first being that the Applicant is
estopped from raising
any defence for reason that it already made an
undertaking to pay the contractual amount to the Respondent. The
second reason is
that even if the agreement was to be declared
invalid, the Respondent already did its part of the contract and
submitted its claims
to the Applicant and the amount is due and
owing. In other words, the Applicant cannot avoid having to pay for
the services it
required and received. I now proceed to deal with the
defences hereunder.
[13]
The events leading to the defence of estoppel
emanate from a letter written by the Applicant dated 10 May 2020. In
this letter,
the Applicant informed the Respondent that they have
realised that the contract entered between them could be unlawful in
that
the letter of appointment in which the Respondent was appointed
to perform the duties as per the contract was signed by a person
who
was no longer employed by the Applicant as a Municipal Manager on the
date it was written. The Respondent was informed that
the Applicant
sees the letter as fraudulent and that it would investigate the
matter further.
[14]
On 18 May 2020, after receiving this
correspondence, the Respondent informed the Applicant that it
welcomed the investigations and
would as such stop with its services,
just in case the contract is found to be unlawful. Two days later the
Applicant wrote back
and requested the Respondent not to withdraw its
services as per service level agreement as the work was at advanced
stage. It
undertook to pay for all the work done as per the contract.
In light of the above, the Respondent proceeded to do the work
claimed
for in the summons to its completion. It is for this reason
that the Respondent claims that the Applicant is estopped from
raising
any defence that would see it not paying what has been
claimed.
[15]
The
Applicant contends against this submission based on a decision by the
Supreme Court of Appeal (the SCA) in
City
od Tshwane Metropolitan Municipality v RPM Bricks (PTY) LTD
[6]
.
In this decision, the SCA held that
when
deciding whether the doctrine of estoppel may be raised against a
statutory body, a distinction must be drawn between
(a)
acts
beyond or in excess of the legal powers of a public authority;
and
(b)
the
irregular or informal exercise of power granted. The failure by a
statutory body to comply with provisions which the legislature
has prescribed for the validity of a specified transaction falls
within category
(a)
and
cannot be remedied by estoppel because that would give rise to a
transaction which is unlawful and therefore
ultra
vires
.
This is to be distinguished from the failure by a statutory body to
comply with all the relevant internal arrangements and formalities,
which falls within category
(b)
and
in respect of which estoppel may be successfully invoked.
[16]
The Respondent argued that the alleged
unlawfulness
in casu
falls
into category (b) above as it was failure by the Applicant to adhere
to its own internal policies. I cannot agree with this
submission.
The policies requiring the contracts similar to the one signed by the
Applicant and the Respondent to undergo a competitive
bidding give
effect to the constitutional requirement, without which, the conduct
would be unconstitutional and invalid. In making
an undertaking to
honour the contract, the Applicant was giving itself powers it does
not have if the contract was thus unlawful.
I agree with the
Applicant that the doctrine of estoppel cannot be applied in facts of
this case.
[17]
I take this view with serious concerns in that the
conduct of the Applicant is somewhat concerning. Upon close analysis
of the facts,
the Applicant is uncovered as contractual party who may
not have had an intention to perform his obligations in terms of the
contract,
but smooth-talking the other party into performance
hoodwinking him to believe that he too, will perform his part. This I
say because
in all the years that lapsed after the agreement was
signed, the Applicant had more than one reason to believe that the
contract
was unlawful, yet it failed to raise this during the
subsistence of the contract or at least before the Respondent
finished its
contractual obligations.
[18]
It was only after the other party has exhausted
its contractual obligations which came at some financial cost that it
started fighting
not to perform what it made the other party to
believe it would do. To achieve this, it is willing to spend on legal
expenses which
indirectly come from the public, causing those members
of the public who are contracted to perform, to pay more money over
and
above the contractual expenses, in legal costs. The ground does
not even look levelled. This, I find to be distasteful.
[19]
It is
the second reasoning that flips the scales in favour of the
Respondent. The question is whether there are prospects of success
if
this defence is successfully raised. The SCA had to deal with the
overlapping requirement of a good cause against the prospects
of
success in
Madinda
v Minister of Safety and Security.
[7]
It held,
“
The
second requirement is a variant of one well known in cases of
procedural non-compliance. See
Torwood
Properties (Pty) Ltd v South African Reserve Bank
1996
(1) SA 215
(W)
at
227I - 228F and the cases there cited. 'Good cause' looks at all
those factors which bear on the fairness of granting the relief
as
between the parties and as affecting the proper administration of
justice. In any given factual complex it may be that
only some
of many such possible factors become relevant. These may include
prospects of success in the proposed action, the reasons
for the
delay, the sufficiency of the explanation offered, the bona fides of
the applicant, and any contribution by other persons
or parties to
the delay and the applicant's responsibility therefor.”
[20]
In
Hlatshwayo
and Others v MEC for Health Mpumalanga
[8]
,
Mashile J summarised the requirements as follows,
“
Without
detracting from the fact that ultimately the interest of justice will
dictate whether or not it is appropriate to grant
condonation, case
authority
suggests that a collective demonstration of the following factors
should attract favourable consideration from a court
when good cause
is assessed:
1. Prospects
of success in the action;
2. Reasons
for the delay;
3.
Sufficiency of the explanation offered;
4.
Bona
fides
of the applicant; and or
5. Any
contribution by other persons to the delay (and the applicant’s
responsibility therefor).”
[21]
It
should be borne in mind that in assessing the prospects of success,
the focus should be at the order granted in the default judgment,
not
just a declaration of unlawfulness in isolation. The court was
referred
by
both parties
to
Buffalo
City
Metro
Muni v Asla Construction (Pty) Ltd
[9]
and
Govan
Mbeki
Municipality v New Integrated Credit Solutions (Pty) Ltd
[10]
being the decisions by the Constitutional Court and the SCA. The
Applicant focused on the finding of unconstitutional and invalidity
in all the two cases based on the reason that the contracts were
entered into without a competitive bidding process.
[22]
The
Respondent on the other hand drew the court’s attention to the
fact that in both cases, the delay time from the date of
contract
until the date of self-review remained the focal point. Further to
this, the courts refused to allow the declaration of
invalidity to
have any impact on the part of the contract that had been performed
already. The delay in bringing a review in
Buffalo
City
Metro
Muni v Asla Construction (Pty) Ltd
[11]
was
by 14 months which was out of time for a review under the
Promotion
of Administrative Justice Act, No. 3 of 2000
. The Constitutional
Court was willing to still consider a review under the principle of
legality. It held that when the law on
procurement was plainly
ignored and not followed, courts were obliged to declare the contract
invalid. As a just and equitable
decision, it ordered that despite
the contract’s invalidity, it should not be set aside. This was
to preserve the respondent’s
accrued rights thereunder.
[23]
In
Govan
Mbeki
Municipality v New Integrated Credit Solutions (Pty) Ltd,
[12]
a
delay of 22 months was found to have been unreasonable. The SCA
however proceeded to declare the contract invalid and had it
partially set aside so as to allow the respondent to claim what was
rightly due in terms of that contract. This trend when it comes
to
just and equitable decision has its roots in the Constitutional Court
decision of S
tate
Information Technology Agency SOC Ltd v Gijima Holdings (Pty) Ltd
[13]
where a contract was similarly declared invalid and set aside. The
court however declared that the order of constitutional invalidity
does not have the effect of divesting the respondent of any
rights it would have been entitled to under the contract, but
for the
declaration of invalidity
.
[24]
In
this case, the delay is over five years and still counting as there
is no review underway. I can only repeat the concerns raised
by the
SCA when it
expressed
concern at the phenomenon of self-reviews, which it described as a
burgeoning and troubling one. It stressed that corruption
and
maladministration were inconsistent with the rule of law and were the
antithesis of open, accountable and democratic government.
The
functionaries involved, it noted, were almost never subject to
scrutiny and sanctions and in some cases falsely assumed the
moral
high ground. The problem, the court held, was that corrective action,
by way of self-review, was usually sought a considerable
time after
an impugned decision was made and disciplinary steps against those
concerned might face time problems. However, if the
maladministration
or corruption were discovered late by conscientious officials seeking
to take corrective and appropriate action,
the SCA added, courts
might insist in the future that public authorities seeking time
indulgences set out the steps they had taken
in relation to the
misconduct by errant officials that resulted in the need for
corrective action, including, but not limited to,
disciplinary
action, and, where appropriate, criminal proceedings; all the more
so, if the corruption or maladministration was
hidden from disclosure
by inept or corrupt officials. Further, the SCA stated, if a service
provider was complicit, then questions
might be asked about what
steps were taken by the public authority in relation to such
complicity.
[14]
[25]
It is in light of the above that self-review of
this contract is necessary and long overdue, so that corrective
measures to prevent
it from happening in the future may be adopted.
On the face of it, the contract looks invalid as it did not go
through the competitive
bidding. The question remains as to what
impact would a just and equitable decision have on the judgment
granted in default in
this matter. Decided cases do not favour the
argument presented by the Applicant which suggested that it could be
absolved from
performing its contractual obligations and thereby
upsetting the order in the default judgment. While the contract may
be declared
invalid, there is no basis for the declaration to have
any impact on the parts of the contract already performed by the
Respondent.
The Applicant remains liable and contractually bound. In
essence, I find that there are no prospects of success.
[26]
For these reasons set out above, I make the
following order.
[26.1] The application
for rescission is dismissed.
[26.2] The Applicant is
ordered to pay the costs of this application.
TV
RATSHIBVUMO
JUDGE
OF THE HIGH COURT
FOR
THE APPLICANT:
: ADV V MABUZA
INSTRUCTED
BY
: QQ MKHTSHWA INC
:
NELSPRUIT
FOR
THE RESPONDENT
: ADV. G BENSCH
INSTRUCTED
BY
: WEAVIND & WEAVIND INC
:
PRETORIA
C/O:
DU
TOIT SMUTS & PARTNERS
DATE
HEARD
: 05 MAY 2022
JUDGMENT
DELIVERED
: 30 MAY 2022
[1]
See p. 8 para 12 of the
Founding Affidavit.
[2]
1985
(2) SA 756 (A).
[3]
Hardroad
(Pty) Ltd v Oribi Motors (Pty) Ltd
1977
(2) SA 576 (W).
[4]
Zuma
v Secretary of the Judicial Commission of Inquiry into Allegations
of State Capture, Corruption and Fraud in the Public Sector
Including Organs of State and Others
(CCT
52/21)
[2021] ZACC 28
;
2021 (11) BCLR 1263
(CC) (17 September 2021)
at psra 71.
[5]
Chetty v Law Society,
Transvaal
(
supra
)
at 761C-G
[6]
2008
(3) SA 1 (SCA).
[7]
[2008] ZASCA 34
;
2008
(4) SA 312
(SCA) at para 10.
[8]
(890/2017)
[2022] ZAMPMBHC 22 (30 March 2022) at para 28.
[9]
(CCT91/17)
[2019] ZACC 15
;
2019 (6) BCLR 661
(CC);
2019 (4) SA 331
(CC) (16
April 2019).
[10]
(121/2020)
[2021] ZASCA 34; [2021] 2 All SA 700 (SCA); 2021 (4) SA 436 (SCA) (7
April 2021)
.
[11]
Supra
.
[12]
Supra
.
[13]
2018
(2) SA 23 (CC).
[14]
Govan
Mbeki
Municipality v New Integrated Credit Solutions (Pty) Ltd (Supra)
at
para 47.